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Sunday, 22 September 2013

Germany decides

This article was published in The Malta Independent on Sunday - 22 09 2013

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In today’s German elections the electorate is not simply deciding
who will occupy the Chancellery for the next term and the shape of the
coalition that will form Germany’s next government. They are by and large deciding the future of
the EU and the Euro.

Germany is a big part of the solution to the Euro problem. Failure to acknowledge this renders resolution
of the problem far more challenging and complex.

This was nowhere more evident than in an opinion piece written this
week by German Finance Minister Wolfgang Schauble, a prominent member of
Chancellor Merkel’s CDU. Under the
title “Ignore the doom-mongers- Europe
is being fixed” published in the Financial Times ( Sept 17th) Mr
Schauble argues that the German austerity recipe is the right cure for Europe’s
problems, that progress is already evident and as fiscal discipline turned
Germany from the sick man of Europe in 2003 to the economic power house it is today,
so the periphery countries under distress have to stay the course till
redemption comes.

“Structural reforms take time. Those responsible for
them need patience and an aptitude to ignore the siren call of quick fixers and
the protestations of special interests.
Signs of improvement are no reason to backtrack – they are reason to
persevere…… We should fight the human tendency to extrapolate the present
forever into the future. Systems adapt, downturns bottom out, trends turn. In
other words, what is broken can be repaired Europe today is the proof”

Politicians must think positively. When
facing a weekend election politicians must be doubly positive. So while there
is truth in Wolfgang Schäuble’s assertion it does not go far enough.

What matters is not whether Europe is
being fixed. Time will fix anything if you can afford it. The question is
whether the speed at which Europe is being fixed is something that countries in
distress can bear for long enough to stay the course, or whether democratic
systems under stress in deficit countries will abort the process before
completion. Under extreme pain of austerity without growth, electorates may
turn to extreme populists that offer easy solutions. This almost happened in
Italy just last February.

The comparison that the German minister
makes between Europe and his own country’s experience since 2003 is comparing
apples with pears. Germany was endowed
with the strong legacy of an export-oriented industrial base, which could
produce exports as the country regained competitiveness through socially-fair
burden-sharing adjustment. It had the benefit of strong demand from the current
crisis-stricken EU countries as it turned a self-serving blind eye to their
breaking of the single currency monetary rules. On the contrary, the
crisis-stricken EU countries are today facing a global recession in which even
countries that, like Germany, can afford to loosen up to stimulate consumption,
insist on the false virtues of balanced budgets.

Next week, Mr Schäuble may have to work
harder to match his pre-election positive outbursts. With the next elections
far over the horizon he may finally accept that surplus countries have to do
their part to restore internal equilibrium within the EU and in a timely manner
that protects the solidarity that Europe stands for.

Yet next week Mr Schäuble may no longer
be in charge of Germany’s finance ministry if the polls indicating the need for
a grand coalition between the CDU/CSU and the SPD are proven right. In such a scenario it is probable that Peer
Steinbrueck SPD probably unsuccessful
challenger to Mrs Merkel, will be
restored to his post as Minister of Finance, a post he held quite successfully
in the last grand coalition.

Such a scenario opens the way for Germany
to adopt a much more pragmatic view to resolving Europe’s economic distress and
instability of the Euro monetary system. In her last term as Chancellor Merkel
would not want to leave a legacy of breaking the Euro. She wants to be remembered as the saviour of
the Euro, a monetary system that has brought so much benefit to Germany’s
economy helping it to remain rock solid whilst all around it were floundering.
Steinbrueck as finance minister will implement his Marshall Plan approach
towards the restructuring of the economy of countries in distress and will
abandon the Versailles approach insisted upon under Schauble’s guardianship.

In the last weeks of the electoral
campaign I perceived a stance on the part of Mrs Merkel where she sent discrete
signals to push the last coalition partners FDP below the 5% threshold. This would deny them parliamentary
representation, and leave the grand coalition as the inevitable solution for a
stable government. This will strengthen Merkel’s
hand to overcome internal resistance towards a more benign approach towards the
Euro problem. It would also help to
bridge the conceptual differences between Germany and France and augur well for
a rapprochement of the twin motor that is necessary to drive European
integration forward to the next level.

For all their economic strength Germany
remains shy of their economic power and as always need France by its side to give it political cover
for the institutional changes that would be necessary to deliver an ever closer
Europe.

A new chapter for Europe and the Euro
begins tomorrow.

Yesterday’s 49th independence
celebration also opens the way to some political maturity that Malta needs to
reach in preparation for the 50th anniversary next year. In a conference held in 1989 on the 25th
anniversary I had concluded my speech as follows:

“In my opinion
just as a young man celebrates his birthday whatever the circumstances of his
birth, so Malta should celebrate the anniversary of its political birth and
keep open if you will at the political level the argument whether we should
eulogise or otherwise those who with an eye on perception rather than reality, ruled over our political birth among thorns when
with more propriety, wisdom and affection could have had our birth at least on
straw if not on cotton wool.”

By the time we come to celebrate the
second 25 years of our nationhood may be we would have moved close enough to
political maturity to choose Independence Day as our one and only national day,
keeping other days as state holidays to commemorate the respective events. We
may learn to appreciate that in celebrating Independence we are not strictly
celebrating the event. We celebrate the
journey leading to it and the key political developments that followed it.